Business Year-End Checklist 2010/2011

Many of our business clients like to review their tax position at the end of the financial year and evaluate any year-end strategies that may be available to legitimately reduce their tax. Traditionally, year-end tax planning for small businesses is based around two simple concepts - i.e., accelerating business deductions and deferring income.

The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers

Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:1. Prepayment strategies; Any part of the prepayment relating to the period up to 30 June is deductible in full. In addition, non-SBE taxpayers may generally claim the following prepayments in full: - expenditure under $1,000; - salary and wages; or - expenditure required to be incurred under law.2. Accelerating expenditure; This is where a business taxpayer brings forward the expenditure on regular, on-going deductible items. Business taxpayers are generally entitled to deductions on an "incurred basis". Therefore, there is no requirement for the expense to be paid by 30 June 2011. As long as the expense has been genuinely incurred, it will generally be deductible. 3. Accrued expenditure; Non-SBE taxpayers (and some SBE taxpayers) are entitled to a deduction for expenses incurred as at 30 June 2011, even if they have not yet been paid.

Maximising deductions for SBE taxpayers

Deductions can be maximised for SBE business taxpayers by accelerating expenditure and prepaying deductible business expenses. Former STS taxpayers who have continued to use the STS cash method since before 1 July 2005 cannot accrue expenses, but other SBE taxpayers on an accruals basis can accrue expenses (see above for accruing expenditure).

Accelerating expenditure - SBEFormer STS taxpayers who have continued to use the STS cash method since before 1 July 2005 and who qualify as an SBE are generally only entitled to deductions if they have paid the amount by 30 June. This includes general deductions, tax-related expenses, and repairs.

All SBE taxpayers can choose to write-off depreciable assets costing less than $1,000 in the year of purchase. Also, assets costing $1,000 or more with an effective life of less than 25 years can be depreciated at 15% (which is half the full rate of 30%) in their first year (note that, if such assets were acquired between 13 December 2008 and 31 December 2009 and then installed ready for use between 1 July 2010 and 31 December 2010, the SBE may also be entitled to an additional 50% deduction in the 2010/2011 income year).

Prepayment strategies - SBESBE taxpayers making prepayments before 1 July 2011 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2012). Otherwise, the prepayment rules are the same as for non-SBE taxpayers.

Information RequiredThe following documents will be needed to prepare your income tax return:1. Stocktake details as at 30 June. 2. Debtors listing (including a list of bad debts written off) as at 30 June. Note: In order to claim a deduction, the debt must be written off on or before 30 June. 3. Creditors listing as at 30 June.